3 Retailers to Watch Ahead of Earnings

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Tuesday was an exciting session for retail-sector watchers as Wal-Mart (NYSE:WMT) and Home Depot (NYSE:HD) reported their quarterly earnings numbers … to mixed results. While Wal-Mart disappointed, Home Depot managed an 8-cent positive earnings surprise that also handily exceeded the previous year’s earnings. WMT suffered a blow of nearly 4% during the session while HD edged about half a percent higher.

As the end of earnings season approaches, retailers become more prominent in the earnings news. Through the remainder of this week, we will hear from companies such as Limited Brands (NYSE:LTD), Chico’s FAS (NYSE:CHS), TJX Companies (NYSE:TJX), and Target (NYSE:TGT). But investors also will want to keep an eye on these three other retail names slated to report this week.

Sears Holdings

Sears Holdings (NASDAQ:SHLD), the parent of the Sears and Kmart brands, will report Thursday before the market opens. Analysts are expecting earnings of 78 cents per share, a far cry from the $3.67 SHLD earned in the fourth quarter of 2010. It is, however, predicted to be the company’s first profitable quarter in the past four. (Like many retailers, SHLD benefits from holiday shopping trends and therefore posts its best results in the fourth quarter of each year.)

The company has endured a rocky earnings track record of late, missing analysts’ consensus estimate in six of the past eight quarters. When the company posted a negative earnings surprise on Nov. 18, the stock dropped 1.4% the following session and continued to decline for the remainder of the month.

Recently, however, SHLD has embarked on quite the uptrend; year-to-date, SHLD shares are up 60%. The stock also has muscled back above its 10-day and 20-day moving averages, which chartists might now say should act as technical support.

Another factor SHLD might have in its favor is relatively heavy short interest. About 14.2 million SHLD shares have been sold short (for a short-interest ratio of 4.5 days to cover). Should the stock continue to rally, investors who sold it short might want to close their positions by buying it back, creating additional buying demand otherwise known as a “short squeeze.”

Kohl’s

Kohl’s (NYSE:KSS) also will release its fourth-quarter results ahead of Thursday’s opening bell. Analysts are calling for per-share figures of $1.80, a 14-cent improvement from the previous year. The “whisper number” also weighs in at $1.80. KSS’ actual earnings have exceeded the consensus view in five of the past eight quarters.

Most recently, on Nov. 10, the retailer’s earnings topped analysts’ projections by a penny per share. KSS shares responded favorably, jumping more than 4% in the subsequent session before pulling back over the course of the next week or so.

KSS shares have gained 13% so far in February after bottoming out around the $46 level. They, too, have overtaken their 10-day and 20-day moving averages, which might be a positive sign for the stock’s short-term price action.

Gap

Gap (NYSE:GPS) will weigh in with its earnings results after Thursday’s close. The consensus forecast calls for per-share results of 42 cents per share, which is a step back from year-ago results of 60 cents. On the positive side for GPS, the company has issued a positive surprise in seven of the past eight quarters. (Of course, this merely elevates expectations that the company will again issue a similar surprise.)

On Nov. 17, GPS issued third-quarter earnings of 38 cents per share, topping Street estimates by two pennies. Despite this positive earnings surprise, the stock retreated lower the following session and continued to drop over the course of the next week. It is therefore possible that the retailer’s report didn’t meet the heightened expectations of investors.

Technically speaking, GPS has gained almost 50% in the past six months and is currently challenging its 52-week high of $23.73. A strong turn in the earnings confessional could allow the stock to power through this level. Disappointing results, on the other hand, could reinforce this historical high as a level of theoretical resistance.

As of this writing, Beth Gaston Moon did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2012/02/3-retail-stocks-to-watch-earnings-shld-kss-gps/.

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